In the summer of 1967, Motown was at a creative and commercial peak. As white rock turned Technicolor, the label had kept pace - with mindblowers such as the Supremes' Reflections and the Four Tops' Reach Out I'll Be There and Bernadette, consciously assimilating Dylan and psychedelia without breaking sweat. The Supremes racked up their 10th number one that summer with The Happening, yet within a year they couldn't even hit the top 20. By the time athletes John Carlos and Tommie Smith gave Black Power salutes at the 1968 Mexico Olympics, Motown's slogan "The Sound of Young America", seemed laughable. What happened?

The internal rupture started in 1967 when Motown offices moved from the clapboard "Hitsville USA" shack on Detroit's West Grand Blvd to the monolithic, 10-storey Donovan Building on Woodward Avenue. The same year saw the label's biggest stars, the Supremes, feel the wrath of owner Berry Gordy. He had long planned for his paramour, Diana Ross, to be a solo star, and when Flo Ballard - who had formed the group and chosen the name - got too lippy about her subordinate role, she was replaced by lookalike Cindy Birdsong. Ballard died in poverty five years later.

Gordy started spending more and more time at the label's Los Angeles office, and moved his family from Detroit to the west coast. Rumours went around the studio that the whole operation would soon follow. This was unthinkable - not just because there seemed little to gain from breaking up a winning formula, but also because of what Detroit represented to black America. Families had moved there for decades and built a community that was epitomised by Motown's success. What happened in the summer of 1967 convinced Gordy to break this family apart.

For America, 1968 began bleakly with the Tet offensive, and worsened with the assassinations of Martin Luther King and Bobby Kennedy. Race riots throughout the country led to the Black Panthers and other organisations radicalising black youth. Detroit had been the canary in the coalmine the previous year when terrified staff and musicians were pinned in Hitsville USA as the city burned around them: after five days' rioting, 43 were dead and 7,000 arrested. Gordy was still obsessed with bridging the race gap by grooming his artists - Motown stars were trained by Maxine Powell, who used to tell them they were being modelled to perform in Buckingham Palace and the White House. At a Black Power rally in Detroit in early July 1967, H Rap Brown foreshadowed the problems to come, saying that if Motown didn't come around, "we are going to burn you down".

On a musical level, the fundamental change was the departure of the label's key writing team, responsible for all of the Supremes and Four Tops' biggest hits. Lamont Dozier, Brian and Edward Holland split from the company in late 1967 claiming they weren't earning anything like their due, and throughout 1968 lawsuits and counter-suits took up valuable creative time, a price Gordy paid for his perceived meanness.

The Four Tops suffered most; their 1968 singles were dusted-down Holland/Dozier/Holland recordings from the previous year (one of which, the minor hit I'm in a Different World, the team oddly claim to be their greatest Tops creation). Meanwhile, Aretha Franklin was placing deep soul on mainstream radio, Otis Redding's death was mourned by black and white alike, and Sly and the Family Stone' rock/soul fusion and Philly's Delfonics were pointing towards the 1970s. The Impressions and James Brown's Say It Loud (I'm Black and Proud) placed black consciousness high on the Billboard charts. Old Motown outtakes could never compete.

A kid called Joseph McLean from Brooklyn was thought to be the label's salvation. He claimed to have walked to Detroit clutching his old acoustic with the intention of becoming Motown's biggest ever star. He ingratiated himself with staffers Frank Wilson and Hank Cosby and was signed while Berry Gordy was in LA. McLean had converted to Islam while in prison, and wished to record under the name Abdullah. Once in the studio, he wouldn't let women go near the drums as he believed that menstruation drained their power. The maverick singer struggled to keep tempo and he had no concept of key changes.

Very much a Black Power believer, McLean also didn't trust the white guys in the Donovan building. After his debut 45, Here I Stand the Mighty One, bombed, he confronted one of them - Ralph Seltzer, Gordy's tough-nosed "administrator". McLean called Seltzer a "blue-eyed devil" and thrust a paper knife at his throat. (According to Hank Cosby in Ben Edmonds' What's Going On, it was a machete he'd kept hidden in his guitar case.) Either way, "Abdullah" was on the next plane back to Brooklyn.

McLean had hoped to save Motown and, in a way, he did. With a new sense of perspective, understudies such as Cosby, Wilson, and Norman Whitfield suddenly took the label back towards its audience and into a heavier place. Whitfield's futuristic work on the Temptations' Cloud Nine reflected drug culture, the Supremes cut the taboo-busting Love Child and went back to No 1 in November; at the year's end Marvin Gaye's eerie, apocalyptic I Heard It Through the Grapevine became the best-selling single in the label's history. Crisis over. The new sound of young America was all dysfunction and darkness. By Christmas, five singles in the Billboard top 10 bore the Motown legend.